- This topic has 178 replies, 21 voices, and was last updated 13 years, 4 months ago by
.
- Posts
Reality is yet to bite yet for many people. The sh1t will really hit the fan over the next 18 months.
Upping the corporation tax rate would be an unmitigated disaster for this country.
Here’s a snippet from the financial pages of today’s
Sunday Telegraph
doubtless reported in other organs:-
US firms warn Irish over tax move
The Irish government has been given a stark warning from some of the biggest American companies in Ireland on the risk of a mass exodus if the country’s low corporation tax rate is raised.
The warning – from executives at Microsoft, Hewlett-Packard (HP), Bank of America Merrill Lynch and Intel – spoke of the "damaging impact" on Ireland’s "ability to win and retain investment" should the country’s corporation tax rate be increased from 12.5pc.It came as talks between members of the Irish government and the European Union and the International Monetary Fund continued around the clock on a financial aid package of as much as €100bn to shore up the country’s beleaguered banking system.
Although Brian Lenihan, the Irish finance minister, has indicated Ireland’s 12.5pc corporation tax rate – the lowest in the eurozone – will not be raised, a number of factions within the European Union are known to have pushed for it to be increased in return for the bail-out.
Nicholas Sarkozy, the French president, said yesterday that while raising taxes will not be a condition of the bail-out, he expects Ireland to raise its corporation tax rate: "It’s obvious that when confronted with a situation like this, there are two levers to use: spending and revenues. I cannot imagine that our Irish friends, in full sovereignty, [would not use] this because they have a greater margin for manoeuvre than others, their taxes being lower than others."For full article:-
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8148882/US-firms-warn-Irish-over-tax-move.htmlNow I’m no economist, but judging by the complete and utter balls-up that those in power in the UK, USA and the EU have made of things, perhaps that’s no bad thing.
It only re-inforces my opinion that politicians (Thatcher excluded) are totally f&&&ing clueless.
So, I’ll give you my opinion on what the expert in Brussells, Munich, Paris and London should do.
1) To stimulate growth – CUT TAXES. Yes CUT. Yet Ireland’s being co-erced into raising Corporation Tax and our coalition hasn’t got the gumption to halt the post-election 50p top rate tax that Gordon Brown introduced. Not to help the UK’s tax take (he might be a tit but surely even he has heard of the Laffer Curve), but set the tories a pre-election dilemma as to whether they should abolish it and be made to look like the party of the wealthy. Politically cunning but selfish and disloyal.
2) Cut government/public spending.Ireland can’t do the cutting taxes bit ‘cos they’re in the Euro. The UK could do both, but haven’t got the balls to do a meaningful tax-cutting budget. They’re going to raise the income level below which the individual doesn’t pay tax – but not as radically as the Lib-dems (to their credit) wanted, and they’ve reduced business taxes a little, but enough to stimulate growth, private sector jobs and tax revenues? We shall see.
It saddens me to see the Irish dilemma and those on this side of the water who gloat that it’s their own fault ‘cos they went into the euro may not be so smug when the effect of quantative easing becomes apparent a few years from now. We’re storing up big inflation problems. It can’t be that far off before our QE chickens come home to roost and you’ll need a fiver to but a kit-kat and a daily paper.We’re storing up big inflation problems. It can’t be that far off before our QE chickens come home to roost and you’ll need a fiver to but a kit-kat and a daily paper.
Has QE already contributed to inflation?
Up again beyond forecasts to 3.5% I believe which is well beyond the Bank of England’s target
I thought ‘Moral Hazard’ and ‘Collateral Damage’ were splendidly awfully nastily black euphemisms but ‘Quantitative Easing’ caps them both
It saddens me to see the Irish dilemma and those on this side of the water who gloat that it’s their own fault ‘cos they went into the euro may not be so smug when the effect of quantative easing becomes apparent a few years from now
.. they were told and warned over and over and over not to join to Euro and not surrender the flexibility that being outside of it gives you. They decided not to listen and it’s blown up in their faces. It’s not a matter of gloating or being happy that the Irish and Greeks are going to face real hardship, this melt down was inevitable.
The effect of QE in the UK will never be as harsh as it will in the poorer Euro countries because the UK isn’t poor and we control our own currency.
As for the Irish government deciding what to do etc, they will be just working out how to put a spin on telling the people what they have been told to do.
In Greece the national crisis brought down the banks; in Ireland the banking crisis brought down the nation.Big difference.A case study in the risks and dangers of unbridled capitalism.
Election in January with the Greens threatening to pull out of government.
It wouldn’t surprise me if this turned out like 1981-82 when we had three seperate general elections in the space of 18 months. Reality will bite next year when the spending cuts and tax increases hit home. There’s a lot of anger out there and it’s only going to get worse.
In Greece the national crisis brought down the banks; in Ireland the banking crisis brought down the nation.Big difference.A case study in the risks and dangers of unbridled capitalism.
Unfortunately Andy, both countries are stuck with the Euro and can’t raise interest rates to stop the economy from getting out of control. The bail out that the Irish is getting is to capitalise the banks, the Greeks simply ran out of money, after they capitalised their banks.
The sad thing about all of this really is that it will happen over and over because you can’t balance economic growth through taxation alone.
Ireland had a surplus in it’s budget until 2007 I believe. Then people were working and paying their taxes.So it was not the people nor the government that actually brought on the need for the EU rescue.The banks had to be saved. The government can be blamed for saving them.But they were thinking of the small depositors not the Billions that were in the black hole.(I don’t believe they knew just how big and dark the hole was.)That was the choice of the government. Had the banks gone into receivership at the start everyone in Ireland would have lost everything they had in the banks.Hardly an easy decision for the government to make. They will lose their political careers but we won’t lose everything thanks to the discredited and much maligned government.You don’t have to like the gov.to acknowledge they made the correct call given the choices available to them.Incidentally those calling for their heads would have made the same choice regarding the banks I hope.
Following on, I dont believe either Ireland or Greece could afford to capitalize their banks.But Greece had a huge national debt. Ireland was running on a healthy balance sheet (until the bubble burst.)until 2008, hence the need to guarantee the bank deposits of ordinary citizens.
I dunno to be honest .. if I were in their position I would have guaranteed all small investor deposits and let the banks go to the wall. The only losers there would be other banks.
It would have been better for normal people to let the banks sort their own mess out rather than nationalise them and get the tax payer to take on the banks liabilities.
So, I think it is probably the wrong decision, only time will tell I suppose. I just hope that we don’t have another round of bank bail-outs in the UK.
In an attempt to put this – let’s call it 80 billion (107 billion USD) – loan in perspective I’ve been comparing Irish Population and Nominal GDP with those of other countries
(figures in USD, can’t be arsed to convert them)
Ireland
Pop 4.5 million
GDP 228 billion
Per head 51 KGreece
11 million
331 billion
30 KUK
62 million
2,100 billion
35 KUSA
311 million
14,260 billion
46 KNow on the face of it that means Ireland is a wealthy country if the per head figure of 51K can be assumed to be an accurate measure of wealth
However if we take an equally simplistic comparison of GDP with the loan, it would seem the 107 billion amounts to 47% of GDP
47% of Greek GDP would be 156 billion, the UK 987 billion, the USA 6,700 billion or 6.7 trillion
These are staggering figures and by my reckoning the Irish loan constitutes a slightly bigger percentage of their GDP than does the already-implemented 146 billion to Greek GDP
And what would be the reaction if the UK announced it needed nearly a trillion? Let alone the USA’s request for 6.7 trillion
Perhaps more pertinently the per head debt burden this loan leaves each and every one of the Irish people with is 23,780 USD or about 17,600 Euros
Now being something of a simpleton economics-wise I’ve no real idea if this is good, bad or indifferent; it just reads ‘dreadful’ to me
So really what I’m pondering and would like to ask is: do you think the Irish have any hope of a) servicing the repayment of the loan capital or b) even servicing the interest payments?
Apologies if this is all tosh ‘n’ baloney, but it seems logical to me anyway
€85 billion isn’t going to be enough believe it or not. There’s simply no way we can afford to repay this.
I believe we are misusing the word LOAN in our discussion. What is here called a loan was challenged by the consultants on the Bloomberg channel who said it was a back up financial support system to be used when needed by the irish government,not a bailout, not a loan.Since it may not be needed until the middle of 2011it may not be needed at all but right now it is not a bailout or a loan. It is a guarahtee that money will be available when and if needed if we go after the deficit in a workman like manner.
So really what I’m pondering and would like to ask is: do you think the Irish have any hope of a) servicing the repayment of the loan capital or b) even servicing the interest payments?
No hope. Government debt as it stands is 90 billion. Add another 23 billion bond redemption over the next 3 years, 30-40 billion to recapitalise the soon to be nationalised banks and the 45-50 billion needed for deficit funding over the next 3 years and an interest rate of between 6 to 7 percent as punishment from our masters in Berlin to pay for it all. That doesn’t include the 100 billion emergency funding provided to the banks by the ECB or the 30 billion provided by the Irish central bank. The national income is currently 30 billion.
A savage bill to a nation of 4 million of whom 99.9% played no part in the insane lending policy of reckless European banks. Almost incomprehensible that Irish taxpayers and citizens are being asked to underwrite what is essentially the private debt of German investment houses.
Debt renegotiation using the nuclear "default" option is the last chip for anything resembling a clean outcome for both sides. Otherwise its default, period.
Historical times, the birth of the second republic for better or worse is imminent.
"The insane lending policies of reckless European banks". For a minute I thought you were going to say Irish banks.
The Irish government announces its austerity plan:
Among the spending cuts and tax rises are a reduction in the minimum wage, a new property tax and thousands of public sector job cuts.
The four-year plan is designed to save the state 15bn euros ($20bn; £13bn).
The government is also negotiating a bail-out package with the EU and IMF, expected to be worth about 85bn euros.
Tax rises
The recovery plan outlines plans to cut 24,750 public sector jobs, achieve savings in social welfare spending of 2.8bn euros, and raise an additional 1.9bn euros from income tax.
The government will also reduce the minimum wage by 1 euro, to 7.65 euros an hour, and raise VAT from 21% to 22% in 2013, with a further increase to 24% in 2014.
It said it wants to protect health and education spending as far as it can.
The government also said it would maintain the country’s low level of corporation tax at 12.5%. Many commentators in the run up to the plan said raising this rate could be an easy way for the state to increase revenues.
Finance minister Brian Lenihan said the government would also introduce a property tax, called a site value tax, which will cost most homeowners up to 200 euros by 2014.
He added that the spending cuts would be concentrated in areas of highest spending – pay, pensions and social welfare.
"It is important to understand these are key drivers to expenditure and will be curtailed," he told a press conference.
‘Future hope’
In total, the spending cuts will amount to 10bn euros while tax rises will bring in a further 5bn euros.
The government has already implemented 15bn euros of cuts since the onset of the global financial crisis.
Taoiseach Brian Cowen said he hoped the plan would "bring certainty to our people to make sure they have hope for the future".
"We can and will pull through as we have in the past. We love our country and we want to make sure our children have a future here too."
He added that the plan was also "about growing the economy and identifying those sectors of the economy that are proving to be successful".
There’s going to be a few long hard years ahead of us. The question now is not if but when do we default?
VAT up to 24% – Are they going to close all the roads over the border to the North?
- You must be logged in to reply to this topic.